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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________________________
FORM 10-Q
_________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM             TO
Commission file number: 001-38613
_________________________________________________________
Bionano Genomics, Inc.
(Exact name of registrant as specified in its charter)
Delaware 26-1756290
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
9540 Towne Centre Drive, Suite 100,
San Diego, CA
 
 
92121
(Address of Principal Executive Offices) (Zip Code)
(858) 888-7600
(Registrant’s Telephone Number, Including Area Code)
_________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par value per shareBNGOThe Nasdaq Stock Market, LLC
Warrants to purchase Common StockBNGOWThe Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  x No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
   Emerging growth company


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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes   No x

As of May 4, 2023, the registrant had 306,790,214 shares of Common Stock ($0.0001 par value) outstanding.




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BIONANO GENOMICS, INC.
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2

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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIONANO GENOMICS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
 March 31,
2023
December 31,
2022
Assets  
Current assets:  
Cash and cash equivalents$4,104,000 $5,091,000 
Investments91,704,000 108,095,000 
Accounts receivable, net6,780,000 7,022,000 
Inventory33,113,000 29,761,000 
Prepaid expenses and other current assets6,856,000 7,329,000 
Total current assets142,557,000 157,298,000 
Restricted cash400,000 400,000 
Property and equipment, net19,050,000 18,029,000 
Operating lease right-of-use assets7,062,000 7,222,000 
Finance lease right-of-use assets3,657,000 3,707,000 
Intangible assets, net39,351,000 41,143,000 
Goodwill77,289,000 77,289,000 
Other long-term assets2,785,000 2,414,000 
Total assets$292,151,000 $307,502,000 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$15,780,000 $12,534,000 
Accrued expenses9,250,000 10,552,000 
Contract liabilities1,127,000 871,000 
Operating lease liability2,235,000 2,260,000 
Finance lease liability282,000 285,000 
Contingent consideration9,461,000 9,382,000 
Total current liabilities38,135,000 35,884,000 
Operating lease liability, net of current portion5,043,000 5,504,000 
Finance lease liability, net of current portion3,612,000 3,619,000 
Contingent consideration, net of current portion13,680,000 12,970,000 
Long-term contract liabilities194,000 127,000 
Total liabilities$60,664,000 $58,104,000 
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized and no shares issued or outstanding as of March 31, 2023 and December 31, 2022
  
Common stock, $0.0001 par value, 400,000,000 shares authorized at March 31, 2023 and December 31, 2022; 306,790,000 and 297,183,000 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively
31,000 30,000 
Additional paid-in capital617,960,000 599,207,000 
Accumulated deficit(385,839,000)(348,715,000)
Accumulated other comprehensive loss(665,000)(1,124,000)
Total stockholders’ equity$231,487,000 $249,398,000 
Total liabilities and stockholders’ equity$292,151,000 $307,502,000 
See accompanying notes to the unaudited condensed consolidated financial statements
3

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BIONANO GENOMICS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31,
 20232022
Revenue:
Product revenue$5,447,000 $4,206,000 
Service and other revenue1,968,000 1,490,000 
Total revenue7,415,000 5,696,000 
Cost of revenue:
Cost of product revenue3,858,000 3,576,000 
Cost of service and other revenue1,487,000 1,259,000 
Total cost of revenue5,345,000 4,835,000 
Operating expenses:
Research and development13,937,000 10,527,000 
Selling, general and administrative25,976,000 20,277,000 
Total operating expenses39,913,000 30,804,000 
Loss from operations(37,843,000)(29,943,000)
Other income (expense):
Interest income704,000 110,000 
Interest expense(76,000)(77,000)
Other income (expense)117,000 (33,000)
Total other income (expense)745,000  
Loss before income taxes(37,098,000)(29,943,000)
Benefit (provision) for income taxes(26,000)(9,000)
Net loss$(37,124,000)$(29,952,000)
Net loss per share, basic and diluted$(0.12)$(0.11)
Weighted-average common shares outstanding basic and diluted302,045,000 284,613,000 
See accompanying notes to the unaudited condensed consolidated financial statements.
4

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BIONANO GENOMICS, INC.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
Three Months Ended
March 31,
 20232022
Net loss:$(37,124,000)$(29,952,000)
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities
423,000 (1,098,000)
Foreign currency translation adjustments 36,000  
Other comprehensive income (loss)$459,000 $(1,098,000)
Total comprehensive loss$(36,665,000)$(31,050,000)
See accompanying notes to the unaudited condensed consolidated financial statements.
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BIONANO GENOMICS, INC.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited)
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated Other Comprehensive LossTotal Stockholders’ Equity (Deficit)
SharesAmount
Balance at January 1, 2022289,602,000 $29,000 $553,747,000 $(216,119,000)$(539,000)$337,118,000 
Stock option exercises21,000 15,000 — — 15,000 
Stock-based compensation expense— — 5,102,000 — — 5,102,000 
Issuance of common stock due to the vesting of restricted stock units, net of shares withheld to cover taxes65,000 — — — — — 
Net loss— — — (29,952,000)— (29,952,000)
Other comprehensive loss— — — — (1,098,000)(1,098,000)
Balance at March 31, 2022289,688,000 $29,000 $558,864,000 $(246,071,000)$(1,637,000)$311,185,000 
Balance at January 1, 2023297,183,000 $30,000 $599,207,000 $(348,715,000)$(1,124,000)$249,398,000 
Stock option exercises42,000 — 23,000 — — 23,000 
Stock-based compensation expense— — 3,882,000 — — 3,882,000 
Issue common stock, net of issuance costs9,500,000 1,000 14,848,000 — — 14,849,000 
Issuance of common stock due to the vesting of restricted stock units, net of shares withheld to cover taxes65,000 — — — — — 
Net loss— — — (37,124,000)— (37,124,000)
Other comprehensive income (loss)— — — — 459,000 459,000 
Balance at March 31, 2023306,790,000 $31,000 $617,960,000 $(385,839,000)$(665,000)$231,487,000 
See accompanying notes to the unaudited condensed consolidated financial statements
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BIONANO GENOMICS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
  Three Months Ended
March 31,
 20232022
Operating activities:  
Net loss$(37,124,000)$(29,952,000)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization expense3,190,000 2,210,000 
Amortization of financing lease right-of-use asset51,000 29,000 
Amortization (accretion) of interest on securities(82,000)299,000 
Non-cash lease expense113,000 299,000 
Net realized loss (gain) on investments7,000  
Stock-based compensation3,882,000 5,102,000 
Change in fair value of contingent consideration789,000 79,000 
Cost of leased equipment sold to customer88,000  
Changes in operating assets and liabilities:
Accounts receivable242,000 (640,000)
Inventory(5,707,000)(5,938,000)
Prepaid expenses and other current assets471,000 (323,000)
Other assets(372,000)(48,000)
Accounts payable3,017,000 (3,168,000)
Accrued expenses and contract liabilities(978,000)(443,000)
Net cash used in operating activities(32,413,000)(32,494,000)
Investing Activities:
BioDiscovery acquisition, return of purchase consideration from escrow 694,000 
Purchases of property and equipment(360,000)(150,000)
Purchase of available for sale securities (14,954,000)
Sale and maturity of available for sale securities16,888,000 47,179,000 
Construction in progress (832,000)
Sale of property and equipment 27,000 
Net cash provided by investing activities16,528,000 31,964,000 
Financing activities:
Principal payments on financing lease liability(10,000)(8,000)
Proceeds from sale of common stock15,229,000  
Offering expenses on sale of common stock(380,000) 
Proceeds from warrant and option exercises23,000 15,000 
Net cash provided by financing activities14,862,000 7,000 
Effect of exchange rates on cash, cash equivalents and restricted cash36,000  
Net decrease in cash, cash equivalents and restricted cash(987,000)(523,000)
Cash, cash equivalents and restricted cash at beginning of period5,491,000 24,571,000 
Cash, cash equivalents and restricted cash at end of period$4,504,000 $24,048,000 
Reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets to the total amounts reported on the unaudited condensed consolidated statements of cash flows
Cash and cash equivalents4,104,000 24,048,000 
Restricted cash400,000  
Total cash, cash equivalents and restricted cash at end of period4,504,000 24,048,000 
Supplemental cash flow disclosures:
Cash paid for interest$76,000 $70,000 
Cash paid for operating lease liabilities $644,000 $217,000 
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Supplemental disclosure of non-cash investing and financing activities:
Transfer of instruments and servers from property and equipment into inventory$ $544,000 
Transfer of instruments and servers from inventory to property and equipment, net$2,356,000 $2,056,000 
Property and equipment included in accounts payable$230,000 $ 
Operating lease liabilities resulting from obtaining right-of-use assets$ $513,000 
See accompanying notes to the unaudited condensed consolidated financial statements
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BIONANO GENOMICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Basis of Presentation
Description of Business
Bionano Genomics, Inc. (collectively, with its consolidated subsidiaries, the “Company”) is a provider of genome analysis solutions that can enable researchers and clinicians to reveal answers to challenging questions in biology and medicine. The Company offers optical genome mapping (“OGM”) solutions for applications across basic, translational and clinical research, and for other applications including bioprocessing. Through its Lineagen, Inc. (doing business as Bionano Laboratories, “Bionano Laboratories”) business, the Company also provides diagnostic testing for patients with clinical presentations consistent with autism spectrum disorder and other neurodevelopmental disabilities. Through its BioDiscovery, LLC (“BioDiscovery”) business, the Company also offers platform-agnostic software solution, which integrates next-generation sequencing and microarray data designed to provide analysis, visualization, interpretation and reporting of copy number variants, single-nucleotide variants and absence of heterozygosity across the genome in one consolidated view. Through our Purigen Biosystems Inc. (“Purigen”) business, we offer nucleic acid extraction and purification solutions using proprietary isotachophoresis (“ITP”) technology.
Basis of Presentation
The accompanying financial information has been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim reporting purposes. The condensed consolidated financial statements are unaudited. The unaudited condensed consolidated financial statements reflect, in the opinion of the Company’s management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of financial position, results of operations, changes in equity, and comprehensive loss and cash flows for each period presented in accordance with United States generally accepted accounting principles (“U.S. GAAP”). All intercompany transactions and balances have been eliminated. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Reclassifications
Certain amounts reported in prior years have been reclassified to conform with the presentation in the current year. These reclassifications had no effect on the reported results of operations.
Liquidity and Going Concern
The Company has experienced recurring net losses from operations, negative cash flows from operating activities, and accumulated deficit since its inception and expects to continue to incur net losses into the foreseeable future. As of March 31, 2023, the Company had approximately $4.1 million in cash and cash equivalents, $91.7 million in short term investments, and working capital of $104.4 million.
The Company has an accumulated deficit of $385.8 million as of March 31, 2023. During the three months ended March 31, 2023, the Company used $32.4 million cash in operations.
Management expects operating losses and negative cash flows to continue for at least the next year as the Company continues to incur costs related to research and commercialization efforts. Management has prepared cash flows forecasts which indicate that based on the Company’s expected operating losses and negative cash flows, there is substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that the unaudited condensed consolidated financial statements for the three months ended March 31, 2023, are issued. Management’s ability to continue as a going concern is dependent upon its ability to raise additional funding. Management’s plans to raise additional capital to fulfill its operating and
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capital requirements for at least 12 months include public or private equity or debt financings. However, the Company may not be able to secure such financing in a timely manner or on favorable terms, if at all.
Furthermore, if the Company issues equity securities to raise additional funds, its existing stockholders may experience dilution, and the new equity securities may have rights, preferences and privileges senior to those of the Company’s existing stockholders.
The unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the outcome of this uncertainty.
Significant Accounting Policies
During the three months ended March 31, 2023, there were no changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which amends the impairment model by requiring entities to use a forward looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available for sale debt securities. For trade receivables and other instruments, entities will be required to use a new forward-looking expected loss model that generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. The Company adopted ASU 2016-13 as of January 1, 2023.
The cumulative effect of applying the new credit loss standard was not material and, therefore, did not result in an adjustment to retained earnings. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or related financial statement disclosures. In accordance with ASU 2016-13, the Company no longer evaluates whether its available-for-sale debt securities in an unrealized loss position are other than temporarily impaired. Instead, the Company assesses whether such unrealized loss positions are credit-related. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in other income through an allowance account. Unrealized gains and losses that are not credit-related are included in accumulated other comprehensive income.
2. Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and common share equivalents outstanding for the period. Common share equivalents are only included when their effect is dilutive. The Company’s potentially dilutive securities which include outstanding warrants to purchase stock, restricted stock units (“RSUs”), performance stock units (“PSUs”), and outstanding stock options under the Company’s equity incentive plans have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share. Restricted stock is treated as outstanding for accounting purposes. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding because all potentially dilutive securities were anti-dilutive.
Potentially dilutive securities not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti-dilutive are as follows (in common stock equivalent shares):
March 31,
2023
March 31,
2022
Stock options32,013,000 21,531,000 
Unvested restricted stock 4,257,000 
Warrants4,356,000 4,356,000 
RSUs2,457,000 296,000 
PSUs290,000 290,000 
Total39,116,000 30,730,000 
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3. Revenue Recognition
Revenue by Source
Three Months Ended March 31,
20232022
Instruments$1,896,000 $1,596,000 
Consumables2,235,000 1,520,000 
Software1,316,000 1,090,000 
Total product revenue5,447,000 4,206,000 
Service and other1,968,000 1,490,000 
Total revenue$7,415,000 $5,696,000 
The Company has revised the classification of its revenue between the categories in the table above for the March 31, 2022 statement of operations. In the March 31, 2022 statement of operations, “software” was included in “service and other.”
Revenue by Geographic Location
Three Months Ended March 31,
20232022
$%$%
Americas$3,444,000 47 %$3,328,000 58 %
EMEA2,992,000 40 %1,739,000 31 %
Asia Pacific979,000 13 %629,000 11 %
Total$7,415,000 100 %$5,696,000 100 %
The table above provides revenue from contracts with customers by source and geographic region (based on the customer’s billing address) on a disaggregated basis. Americas consists of North America and South America. EMEA consists of Europe, the Middle East, and Africa. Asia Pacific includes China, Japan, South Korea, Singapore, India and Australia. During the three months ended September 30, 2022, the Company changed the presentation of its revenues from India to be included in the Asia Pacific geographic region. Prior to the three months ended September 30, 2022, the Company had presented revenues from India in the EMEA geographic region. The impact of this change on prior period disclosures is immaterial.
For the three months ended March 31, 2023 and 2022, the United States represented 41.2% and 45.0% of total revenue, respectively. No other countries represented greater than 10% of revenue during the three months ended March 31, 2023 and 2022.
Remaining Performance Obligations
As of March 31, 2023, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied was approximately $1.3 million. These remaining performance obligations primarily relate to extended warranty and support and maintenance obligations. The Company expects to recognize approximately 74.9% of this amount as revenue during the remainder of 2023, 20.5% in 2024, and 4.6% in 2025 and thereafter. Warranty revenue is included in service and other revenue.
The Company recognized revenue of approximately $0.7 million and $0.3 million during the three months ended March 31, 2023 and 2022, respectively, which was included in the contract liability balance at the end of the previous year.
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4. Balance Sheet Account Details
Accounts Receivable and Allowance for Credit Losses
March 31,
2023
December 31,
2022
Accounts receivable, net:
Accounts receivable, trade$7,030,000 $7,315,000 
Allowance for credit losses(250,000)(293,000)
$6,780,000 $7,022,000 
Changes to the allowance for credit losses during the three months ended March 31, 2023 were as follows:
Allowance for Credit Losses
Balance as of January 1, 2023$(293,000)
Provision for expected credit loss(5,000)
Write-offs and payments48,000 
Balance as of March 31, 2023
$(250,000)
The Company's adoption of ASU No. 2016-13, Financial Instruments - Credit Losses, included an assessment of our aged trade receivables balances and their underlying credit risk characteristics. Our evaluation of past events, current conditions, and reasonable and supportable forecasts about the future resulted in an expectation of immaterial credit losses.
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Inventory
The components of inventories are as follows:
 March 31,
2023
December 31,
2022
Inventory:
Raw materials$5,800,000 $5,319,000 
   Work in process
10,003,000 7,055,000 
Finished goods17,310,000 17,387,000 
$33,113,000 $29,761,000 
Intangible Assets
Intangible assets that are subject to amortization consisted of the following for the periods presented:
March 31, 2023
December 31, 2022
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Trade name$2,630,000 $(684,000)$1,946,000 $2,630,000 $(552,000)$2,078,000 
Customer relationships4,150,000 (1,379,000)2,771,000 4,150,000 (1,172,000)2,978,000 
Developed technology41,600,000 (7,068,000)34,532,000 41,600,000 (5,615,000)35,985,000 
Intangibles, net$48,380,000 $(9,131,000)$39,249,000 $48,380,000 $(7,339,000)$41,041,000 
Intangible assets not subject to amortization totaled $0.1 million at March 31, 2023 and December 31, 2022, and related to the Company’s domain name.
Accrued Expenses
Accrued expenses consist of the following:
March 31,
2023
December 31,
2022
Compensation expenses$6,349,000 $7,002,000 
Customer deposits17,000 17,000 
Taxes payable848,000 825,000 
Insurance 326,000 613,000 
Professional fees and royalties96,000 210,000 
Warranty liabilities591,000 489,000 
Accrued clinical study fees174,000 250,000 
Other849,000 1,146,000 
Total$9,250,000 $10,552,000 
5. Stockholders’ Equity and Stock-Based Compensation
Cowen At-the-Market Facility
On March 23, 2021, the Company entered into a Sales Agreement with Cowen and Company, LLC (“Cowen”) which provides for the sale, in the Company’s sole discretion, of shares of common stock having an aggregate offering price of up to $350.0 million through or to Cowen, acting as sales agent or principal, which was amended on March 9, 2023 to decrease the maximum aggregate offering price to $200.0 million for sales made on and after the date of the amendment (the “Cowen ATM”). The Company agreed to pay Cowen a commission of up to 3.0% of the aggregate gross proceeds from each sale of shares, reimburse legal fees and disbursements and provide Cowen with customary indemnification and contribution rights. In August 2022, the Company sold approximately 6.6 million shares of common stock under the Cowen ATM at an average share price of $3.46 per share, and received gross proceeds of approximately $23.1 million before deducting offering costs of $0.6 million. During the first quarter of 2023, the Company sold approximately 9.5 million shares of common stock under the Cowen ATM at an average share price of $1.60 per share, and received gross proceeds of approximately $15.2 million before deducting offering costs of $0.4 million.
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Stock Warrants
A summary of the Company’s warrant activity during the three months ended March 31, 2023 was as follows:
Shares of Stock under WarrantsWeighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Outstanding at January 1, 20234,356,000 $5.96 0.76$273,000 
Granted — — — 
Exercised — — — 
Canceled — — — 
Outstanding at March 31, 2023
4,356,000 $5.96 0.52$156,000 
Stock Options
A summary of the Company’s stock option activity during the three months ended March 31, 2023 was as follows:   
Shares of Stock under Stock OptionsWeighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Outstanding at January 1, 202324,022,000 $3.28 8.50$2,068,000 
Granted9,121,000 1.60 — 
Exercised(42,000)0.55 — 25,000 
Canceled(1,088,000)3.37 — 
Outstanding at March 31, 2023
32,013,000 $2.80 8.84$1,147,000 
Vested and exercisable at March 31, 2023
9,149,000 $3.56 7.89$892,000 
For the three months ended March 31, 2023, the weighted-average grant date fair value of stock options granted was $1.07 per share.
Stock-Based Compensation
The Company recognized stock-based compensation expense for the periods presented as follows: 
 Three Months Ended
March 31,
20232022
Cost of product revenue$102,000 $ 
Cost of service and other revenue44,000  
Research and development1,357,000 3,328,000 
General and administrative2,379,000 1,774,000 
Total stock-based compensation expense$3,882,000 $5,102,000 
The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants during the periods presented were as follows:
Three Months Ended
March 31,
20232022
Risk-free interest rate4.0 %1.9 %
Expected volatility72.7 %70.1 %
Expected term (in years)6.06.0
Expected dividend yield0.0 %0.0 %
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Restricted Stock
Restricted Stock
A restricted stock award in the amount of 5.0 million shares with a grant date fair value of $5.20 a share was granted as part of the acquisition of BioDiscovery. One-third of the Restricted Shares was scheduled to vest on October 18, 2022 and one-twelfth of the Restricted Shares was scheduled to vest every three months following October 18, 2022, subject to continuous service of the key employee. The fair value of the restricted stock award was based on the market value of common stock as of the date of grant and was amortized to stock-based compensation expense over the service period.
On October 4, 2022, the restricted stock award was modified due to the change in employment status of the key employee from full time to emeritus. As a result of the modification, the restricted stock award vested in full on October 4, 2022. The award was revalued on the modification date, resulting in a modified grant date fair value of $2.04 a share ($15.8 million less than the initial grant date fair value of the award). The fair value of the modified restricted stock award was based on the market value of common stock as of the modification date.
Restricted Stock Units and Performance Stock Units
The following table summarizes RSU activity during the three months ended March 31, 2023:
Stock UnitsWeighted- Average Grant Date Fair Value per Share
Outstanding at January 1, 202396,000 $4.74 
Granted2,461,000 1.63
Released(65,000)4.74 
Forfeited(35,000)1.63 
Outstanding at March 31, 2023
2,457,000$1.67
The total intrinsic value of the RSUs that vested during the three months ended March 31, 2023 was $0.3 million, determined as of the date of vesting. The weighted average remaining contractual term for the RSUs is 3.5 years as of March 31, 2023.
The following table summarizes PSU activity during the three months ended March 31, 2023:
Stock UnitsWeighted- Average Grant Date Fair Value per Share
Outstanding at January 1, 2023290,000$4.74 
Granted
Released
Forfeited
Outstanding at March 31, 2023
290,000$4.74
The weighted average remaining contractual term for the PSUs is 2.1 years as of March 31, 2023.
Executive Option Grants and RSUs
On February 15, 2023, the compensation committee of the Company’s board of directors granted various executive officers stock options to purchase an aggregate of 3.3 million shares of common stock at an exercise price of $1.63 per share, and RSUs amounting to 0.7 million shares of common stock at a grant date fair value of $1.63 per share, in each case with an effective grant date and vesting commencement date of February 15, 2023 (the “Grant Date”). These stock option grants and RSUs were issued from the 2018 Plan. The shares subject to the option shall vest monthly over 48 months beginning on the one-month anniversary of the Grant Date, such that the option shall be fully vested and exercisable on the four-year anniversary of the Grant Date. The RSUs shall vest annually over four years beginning one year after the Grant Date, and the balance of the shares vest in a series of three successive equal annual installments measured from the first anniversary of the Grant Date, such that the RSU shall be fully vested on the four-year anniversary of the Grant Date.
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Series A Preferred Stock
On April 13, 2023, the Company entered into an agreement with David Barker, the Chair of the Company’s board of directors, pursuant to which the Company agreed to issue and sell one share of the Company’s Series A Preferred Stock, par value $0.0001 per share for a purchase price of $100.00. The closing of the sale and purchase of the share of Series A Preferred was completed on April 13, 2023.
The share of Series A Preferred will have 3.0 billion votes, but has the right to vote only on a proposal submitted to the stockholders of the Company to adopt an amendment, or a series of alternate amendments, to the Company’s Amended and Restated Certificate of Incorporation, as amended, to combine the outstanding shares of Common Stock into a smaller number of shares of Common Stock at a ratio specified in or determined in accordance with the terms of such amendment or series of alternate amendments (“Reverse Stock Split Proposal”), and will have no voting rights (i) except with respect to a Reverse Stock Split Proposal and the votes of the share of Series A Preferred are required to be cast for and against such Reverse Stock Split Proposal in the same proportion as shares of Common Stock are voted for and against such Reverse Stock Split Proposal (with any shares of Common Stock that are not voted, whether due to abstentions, broker non-votes or otherwise not counted as votes for or against a Reverse Stock Split Proposal) and (ii) unless the holders of one-third (1/3rd) of the outstanding shares of Common Stock are present and vote, in person or by proxy, at the meeting of stockholders at which a Reverse Stock Split Proposal is submitted for stockholder approval (or any adjournment thereof). The share of Series A Preferred will vote together with the Common Stock as a single class on a Reverse Stock Split Proposal. The Series A Preferred has no other voting rights, except as may be required by the General Corporation Law of the State of Delaware. The outstanding share of Series A Preferred will be redeemed in whole, but not in part, for a redemption price of $100.00, payable out of funds lawfully available therefor, (i) if such redemption is ordered by the Company’s Board of Directors in its sole discretion, automatically and effective on such time and date specified by the Board of Directors in its sole discretion, or (ii) automatically immediately following the approval by the stockholders of a Reverse Stock Split Proposal.
6. Commitments and Contingencies
The Company has entered into various operating lease agreements and a finance lease agreement, primarily relating to our office, laboratory, and manufacturing space. See Note 11 – Commitments and Contingencies, subsection titled “Leases”, in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2022 for information regarding the Company’s lease agreements.
The future minimum payments under non-cancellable operating and finance leases as of March 31, 2023, are as follows:
Operating LeasesFinance Lease
Remainder of 2023$1,942,000 $242,000 
20242,684,000 330,000 
20252,788,000 338,000 
2026729,000 347,000 
2027255,000 356,000 
Thereafter 5,594,000 
Total future lease payments8,398,000 7,207,000 
Less: imputed interest(1,120,000)(3,313,000)
Total lease liabilities$7,278,000 $3,894,000 
Litigation
From time to time, the Company may be subject to potential liabilities under various claims and legal actions that are pending or may be asserted. These matters arise in the ordinary course and conduct of the business. The Company regularly assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in the unaudited condensed consolidated financial statements. An estimated loss contingency is accrued in the unaudited condensed consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on the Company’s assessment, it currently does not have any material loss exposure as it is not a defendant in any claims or legal actions.
Contingent Consideration
See Note 8 to our unaudited condensed consolidated financial statements for a discussion of the contingent consideration liability.
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7. Acquisitions
Purigen Acquisition
In November 2022, the Company completed the acquisition of Purigen Biosystems, Inc. for approximately $32.0 million in cash and up to an aggregate of $32.0 million in cash payable based on the achievement of certain milestones. Cash of $1.2 million will be held in an escrow fund for purposes of satisfying any post-closing purchase price adjustments and indemnification claims under the Purigen Merger Agreement.
The purchase price allocation for the acquisition of Purigen is preliminary and subject to revision as additional information about the fair value of assets and liabilities becomes available. As permitted under ASC 805, the Company is allowed a measurement period, which may not exceed one year, in which to complete its accounting for the acquisition. Per the terms of the Purigen Merger Agreement, the purchase price is still subject to adjustment for the final determination of cash, unpaid indebtedness, unpaid transaction expenses and working capital, as well for deferred and current tax assets and liabilities.
The following is the estimated purchase price for the acquisition of Purigen:
Cash$32,034,000 
Estimated fair value of milestone consideration12,970,000 
Estimated return of cash to buyer from escrow(90,000)
Total estimated purchase price$44,914,000 
The total estimated purchase price was allocated to Purigen’s tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess recorded as goodwill, as follows:
Cash & cash equivalents$290,000 
Accounts receivable259,000 
Inventory944,000 
Prepaid expenses and other current assets184,000 
Property and equipment, net805,000 
Restricted cash400,000 
Operating lease right-of-use assets1,636,000 
Other long-term assets533,000 
Intangible assets20,000,000 
Goodwill22,651,000 
Accounts payable and other accrued liabilities (1,152,000)
Operating lease liability (short-term and long-term)(1,636,000)
Net assets acquired$44,914,000 
The acquisition date fair values of identifiable intangible assets acquired are as following:
Developed technology$18,800,000 
Customer relationships200,000 
Tradename1,000,000 
Fair value of identifiable intangible assets$20,000,000 
The Company uses the income approach to derive the fair value of the identified intangible assets acquired. This approach calculates fair value by estimating future cash flows attributable to the assets and then discounting these cash flows to a present value using a risk-adjusted discount rate.
The customer relationships and trade name intangibles are being amortized on a straight-line basis over their estimated useful lives of 5 years. The developed technology intangible is being amortized on a straight-line basis over its estimated useful live of 15 years. Straight-line amortization was determined to be materially consistent with the pattern of expected use of the intangible assets.
As the Company began integrating Purigen’s operations with its existing operations during the fourth quarter of 2022, it is not practical or meaningful to distinguish Purigen’s expenses or net income or loss from that of the combined operations.
Pro forma Financial Information
The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and Purigen as if the companies had been combined as of the beginning of the year prior to the acquisition. These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Purigen to reflect
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the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied at the beginning of the year prior to the acquisition. The following unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved as if the acquisition had taken place as of January 1, 2021.
 Three Months Ended March 31,
2022
Revenue$6,220,000 
Net loss(32,048,000)
Basic and diluted net loss per share
$(0.11)
8. Investments and Fair Value Measurements
The Company holds investment securities that consist of highly liquid, investment grade debt securities. The Company determines the fair value of its investment securities based upon one or more valuations reported by its investment accounting and reporting service provider. The investment service provider values the securities using a hierarchical security pricing model that relies primarily on valuations provided by an industry-recognized valuation service. Such valuations may be based on trade prices in active markets for identical assets or liabilities (Level 1 inputs) or valuation models using inputs that are observable either directly or indirectly (Level 2 inputs), such as quoted prices for similar assets or liabilities, yield curves, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, and broker and dealer quotes, as well as other relevant economic measures.
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022:
March 31, 2023
Total Fair Value and Carrying Value on Balance SheetFair Value Measurement Category
Level 1Level 2Level 3
Assets:
Commercial paper$15,216,000 $ $15,216,000 $ 
Corporate notes/bonds74,500,000  74,500,000  
Securities of government sponsored entities1,988,000  1,988,000  
Total investments:$91,704,000 $ $91,704,000 $ 
Money market funds$252,000 $252,000 $ $ 
Liabilities:
Contingent consideration$23,141,000 $ $ $23,141,000 
December 31, 2022
Total Fair Value and Carrying Value on Balance SheetFair Value Measurement Category
Level 1Level 2Level 3
Assets:
Commercial paper$20,020,000 $ $20,020,000 $ 
Corporate notes/bonds86,094,000  86,094,000  
Securities of government sponsored entities1,981,000 1,981,000 
Total investments:$108,095,000 $ $108,095,000 $ 
Money market funds$1,868,000 $1,868,000 $ $ 
Liabilities:
Contingent consideration$22,352,000 $ $ $22,352,000 
Money Market Funds are classified as cash equivalents on the unaudited condensed consolidated balance sheet.
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Contingent Consideration
Contingent consideration relates to the acquisitions of BioDiscovery and Purigen. The outcome of the milestone consideration for all contingent consideration liabilities is binary, meaning the milestones are either achieved or not achieved, and the only other variable factor is the timing of when the milestones are achieved. The fair value measurement of the contingent consideration liabilities is based on significant inputs not observed in the market (Level 3 inputs). These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect the Company’s assumptions in measuring fair value.
The fair value of the BioDiscovery contingent consideration liability is reassessed on a quarterly basis using a probability weighted model. Assumptions used to estimate the acquisition date fair value of the contingent consideration related to the acquisition of BioDiscovery include the probability of achieving, or changes in timing, of certain milestones, and a discount rate. As of March 31, 2023 a discount rate of 3% was used. The Company determined the fair value of the BioDiscovery milestone consideration using a scenario-based technique, as the trigger for payment is event driven. The Company determined it is highly likely that the milestone related to the BioDiscovery acquisition will be achieved and therefore used a 95% probability factor which is applied to the $10.0 million milestone consideration. The change in fair value of the contingent consideration during the three months ended March 31, 2023 was due to the passage of time.
Contingent consideration liabilities related to the Purigen milestones are related to the achievement of two independent milestones with aggregate possible milestone payments totaling $32.0 million.
The fair value of the Purigen milestones are reassessed on a quarterly basis using a probability weighted model and a Monte Carlo Simulation. Assumptions used to estimate the acquisition date fair value of the milestones using a probability weighted model include the probability of achieving, or changes in timing, of independent milestones, and a discount rate of 15%. The Company determined the fair value of this milestone consideration using a scenario-based technique, as the trigger for payment is event driven. The Company determined the likelihood of each independent milestone and used probability factors ranging from 20% to 80% which were applied to the individual payments. A Monte Carlo Simulation was performed to determine the likelihood that the milestone will be achieved and was applied to the milestone consideration payment.
Changes in estimated fair value of contingent consideration liability in the three months ended March 31, 2023 is as follows:
Contingent
Consideration
Liability
(Level 3
Measurement)
Balance as of January 1, 2023$22,352,000 
Liability recorded as a result of current period acquisition 
Change in estimated fair value, recorded in selling, general and administrative expenses789,000 
Cash payments 
Balance as of March 31, 2023
$23,141,000 
Available for Sale Investments
The Company invests its excess cash in U.S. Treasury and agency securities, corporate debt securities, and commercial paper, which are classified as available-for-sale investments. These investments are carried at fair value and are included in the tables below. The Company records an allowance for credit losses when unrealized losses are due to credit-related factors. At each reporting date, the Company evaluates securities with unrealized losses to determine whether such losses, if any, are due to credit-related factors. The Company evaluates, among others, whether the Company has the intention to sell any of these investments and whether it is not more likely than not that the Company will be required to sell any of them before recovery of the amortized cost basis. Neither of these criteria were met in any period presented. The credit ratings of the securities held remain of the highest quality. Moreover, the Company continues to receive payments of interest and principal as they become due, and our expectation is that those payments will continue to be received timely. Based on this evaluation, as of March 31, 2023 and December 31, 2022, the Company determined that unrealized losses of the below securities were primarily attributable to changes in interest rates and non-credit related factors. As such, no allowances for credit losses were recorded during these periods.
As of March 31, 2023 and December 31, 2022, the Company held 17 and 16 securities, respectively, which have been in an unrealized loss position for a period of less than 12 months. As of March 31, 2023 and December 31, 2022, the Company held 19 and 24 securities, respectively, which have been in an unrealized loss position for a period of greater than 12 months.
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Realized gains and losses are calculated using the specific identification method and recorded in other income (expense) in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss. The Company has the ability, if necessary, to liquidate any of its cash equivalents and marketable securities to meet its liquidity needs in the next 12 months.
Interest receivable as of March 31, 2023 and December 31, 2022 was $0.6 million and $0.5 million, respectively, and is recorded as a component of prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets.
As of March 31, 2023, the following table summarizes the amortized cost and the unrealized gains/losses of the available for sale securities:
Remaining Contractual Maturity (in years)Amortized CostUnrealized GainsUnrealized LossesAggregate Estimated Fair Value
Commercial paperLess than 1$